Exam 18: The International Financial System

Explain and demonstrate graphically the situation of an overvalued exchange rate in a fixed exchange rate system.What alternative policies are available to eliminate the overvaluation of the exchange rate?

An international lender of last resort creates a serious moral hazard problem because ________ and other ________ of banking institutions expect that they will be protected if a crisis occurs.

Because many emerging market countries have not developed the political or monetary institutions that allow the successful use of discretionary monetary policy

The World Bank is an international organization that

Under a fixed exchange rate regime,a central bank that does not want to acquire international reserves to keep its currency from ________ will decide to ________ its currency.

If a central bank does not want to see its currency rise in value,it may pursue ________ monetary policy to ________ the domestic interest rate,thereby weakening its currency.

A monetary policy strategy that uses a fixed exchange rate regime that ties the value of a currency to the currency of a large,low inflation country is called ________ targeting.

The net amount of international reserves that move between governments to finance international transactions is called the ________ balance.

Under the Exchange Rate Mechanism of the European Monetary System,when the British pound depreciated below its lower limit against the German mark,the German central bank was required to buy ________ and sell ________,thereby ________ international reserves.

Exchange-rate targeting allows a central bank to ________,thus this will ________ the probability of policy developing a time-inconsistency problem.

Under the Exchange Rate Mechanism of the European Monetary System,when the British pound depreciated below its lower limit against the German mark,the Bank of England was required to buy ________ and sell ________,thereby ________ international reserves.

When gold production was low in the 1870s and 1880s,the money supply grew ________ causing ________.

If a central bank does not want to see its currency ________ in value,it may pursue expansionary monetary policy to lower the domestic interest rate,thereby ________ its currency.

Under exchange-rate targeting,the central bank in the targeting country ________ lose the ability to pursue its own independent monetary policy and any shocks to the anchor country is ________ transmitted to the targeting country.

Under a fixed exchange rate regime,if a country has an ________ exchange rate,then its central bank's attempt to keep its currency from appreciating will result in a ________ of international reserves.

Which of the following does NOT appear in the current account part of the balance of payments?

Under the current managed float exchange rate regime,countries with ________ in their balance of payments frequently do not want to see their currencies ________ because it makes their goods more expensive abroad and foreign goods cheaper in their countries.

Under the Bretton Woods system,the organization assigned the task of making loans to countries that were experiencing balance of payments difficulties is known as the

Under a fixed exchange rate regime,if a country has an overvalued exchange rate,then its central bank's attempt to keep its currency from ________ will result in a ________ of international reserves.

The revenue a government gains from issuing money is